Opening Up Medicaid

There's a little joke that makes the rounds whenever Medicaid directors get together. It goes like this: If you've seen one state Medicaid program, you've...

There's a little joke that makes the rounds whenever Medicaid directors get together. It goes like this: If you've seen one state Medicaid program, you've seen one state Medicaid program.

Not exactly a knee-slapper, but like most jokes that survive over time, it contains an element of truth. The 50 state Medicaid programs are linked by a common funding tie to the federal government and to the underlying mandate: Provide your poorest residents with access to health care. But that's where state-to-state similarities end. Most decisions, from what procedures to cover to how to handle long-term care, are up to individual states.

The variation is not so much an economic or medical calculation as it is a reflection of each state's values. As Mark Pauly, a professor of health care management at the University of Pennsylvania, puts it, "Voters have different preferences with regard to how generous they want to be." As a national program, Medicaid is riven with inequities, and Pauly says those inequities are part of what needs to be smoothed out with health care reform.

His remarks come at a timely moment. Whatever reform package passes, it almost certainly will rest on Medicaid's shoulders. And its impact will vary from state to state depending on choices each has made in the past. This has many a governor worried right now.

For example, one of the most serious proposals would expand Medicaid coverage by raising the income "floor" for eligibility from 100 percent of the poverty line to 133 percent. States that have stuck to the federal minimum would be forced to join the ranks of more generous states that already had been enrolling people with higher incomes. For the states that have been less generous in the past, raising the floor would mean a large increase in enrollment and costs. But the more generous states could see new costs, too. If health care reform includes a Massachusetts-style insurance mandate, more people everywhere will sign up for coverage under Medicaid. That's what happened in Massachusetts.

The key question for states is how much of these new costs the federal government will pick up. Under some plans Congress is considering, the feds would eat expansion costs for the first five years. That's where Vermont Governor Jim Douglas begins to feel spurned -- Vermont already funds coverage up to 200 percent of poverty. Under a House proposal, Douglas says, less generous states will "get a freebie, essentially, up to 133 percent of poverty, and we don't get anything."

But all governors are worried about what would happen if the feds don't pay for the expansion or what comes after five years of coverage when states would be expected to pick up their normal share of Medicaid costs. Washington Governor Christine Gregoire warns that "if we try to cost-shift to the states, we're not going to be in a position to pick up the tab." Tennessee Governor Phil Bredesen goes further. Echoing Pauly's call for reforming Medicaid, he calls the program "a poor vehicle for expanding coverage. It's a 45-year-old system originally designed for poor women and their children. It's not health care reform to dump more money into Medicaid."

Courtney Burke, director of the Health Policy Research Center at the Rockefeller Institute of Government, points out that health care reform will eventually bring benefits to the states. In the short-term, however, there will be significant financial and administrative challenges. The reason governors are speaking out, she suggests, is to make sure the feds recognize this. "States are key players on the team," she says. "They have to remind the feds that they are."